SMALL FIRMS, BUSINESS DYNAMICS AND DIFFERENTIAL DEVELOPMENT OF ECONOMIC WELL-BEING

In recent years a growing stream of research has examined the relation ships between structural characteristics of regions' and their levels of new firm formation. This empirical study aims at supplementing such findings with analyses that include other forms of business dynamics, and also the possible well-being effects of such dynamics. From a uni que and comprehensive data set that tracks all births, deaths, expansi ons, and contractions of commercial business establishments in Sweden 1985-89, six groups of regions with different patterns of dynamics are extracted by means of cluster analysis. The clusters' structural char acteristics and their development of economic well-being are also comp ared. The results suggest a) that the patterns of business dynamics ar e contingent on the structural characteristics of regions, b) that hig h formation and turnover of establishments are associated with a relat ive increase in economic well-being, and c) that small, autonomous fir ms have a vital role in this process.